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GOLD and SILVER edged higher against a falling Dollar in Asian and London trade Monday, each gaining half-a-per-cent after traders in world No.1 consumer country China returned from national holidays.

Gold prices at one point touched $1284 per ounce, some 1.9% above Friday's fresh 8-week low, as the US currency retreated against major rivals and world stock markets fell for a second day from last week's fresh all-time record highs.

Despite cutting their net speculative position as a group to a 5-week low however, the Managed Money category of Comex traders were still 130% more bullish overall than their historic average.

Net bullish betting by money managers on Comex gold derivatives also fell for the 3rd week running on the latest positioning data, down to a 7-week low some 54% larger than the historic average.

Both metals rallied Monday lunchtime against the Euro as the single currency then slipped back on the FX market.

"The ECB is likely to deliver a 'dovish' tightening of policy later this month," reckons Chinese bullion and investment bank ICBC Standard's FX strategist Steven Barrow, "but yields are still seen drifting higher with periphery yields still at risk from the Catalonian crisis."

National police today
took up positions around the Court of Justice of Barcelona – "unprecedented in the last decade," according to newspaper El Pais – ahead of the regional parliament possibly moving to declare independence tomorrow, despite October 1st's officially illegal referendum getting only 40% voter turnout with some 350,000 people protesting their wish yesterday to keep Catalonia part of Spain in the city's Urquinaona Square.

For gold, "we [also] expect to see support leading into the October 10 anniversary of the founding of [North Korea's] ruling Korean Workers Party," says a trading note from Swiss refiners and finance group MKS, "with many fearing that the hermit state may use this day to carry out a further act of provocation" such as another missile test.

Meantime Monday's return of Chinese traders from their week-long National Day break saw the Shanghai gold premium – over and above comparable London quotes – leap to $12 per ounce at the city's afternoon benchmark auction, the highest since June and 40% greater than the historic average.

The London Gold Market Report is the daily market review from BullionVault, the world's largest physical gold and silver market for private investors. A full member of professional trade body the London Bullion Market Association, BullionVault publishes the LGMR every day that the market is open, bringing you insider comment and analysis from the very center of the world's $240 billion-a-day physical gold trade, and putting the latest gold price action into its wider financial and economic context.
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